Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / Suppose that the yield curve shows that the one-year bond yield is 8%, the two-year yield is 7%, and the three-year yield is 7%

Suppose that the yield curve shows that the one-year bond yield is 8%, the two-year yield is 7%, and the three-year yield is 7%

Finance

Suppose that the yield curve shows that the one-year bond yield is 8%, the two-year yield is 7%, and the three-year yield is 7%. Assume that the risk premium on the one-year bond is zero, the risk premium on the two-year bond is 1%, and the risk premium on the three-year bond is 2%. 

 

The expected one-year interest rate next year = ?%

 

The expected one-year interest rate the following year =?%

 

I came up with 8% and 8.07% which i got wrong.

 

Thanks for your help!

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE